General

The majority of repayments are issued by the COTAX system, either automatically or following the use of functions DIRR or DREP (Direct Repayment). Repayments that are made by COTAX are always made in this order:

to debit or credit card where the conditions are met

the recipient’s bank or building society account, using Bacs

by payable order.

The repayment should be made through OAS or by manual payable order where COTAX cannot issue it because:

the system will not allow it

it’s over £150,000 and bank details cannot be obtained to make the repayment by Bacs or

the company have requested repayment by CHAPS (Clearing House Automated Payment System).

Although it is now a legal requirement for all companies to file their tax return online and pay any amounts due electronically, it is still not a legal requirement for a company to complete their bank details on their tax return, nor has it been mandated for repayment to be made electronically. However, you should always make every effort to obtain bank details so that a repayment can be made by Bacs as this is the cheapest and most secure method of making a repayment.

Method of repayment

Debit or credit card

Where a repayment is due for one or more APs and the last payment made on the latest of those APs was made by debit or credit card and certain conditions are met, the repayment is made to the card account. The conditions are that:

the repayment is not for interest only

the card payment was not made more than nine months before the date of the repayment

the repayment does not exceed £98,500

the repayment does not exceed the amount of the original card payment, less any repayments already made to the card.

If the conditions are met, the repayment must be made to the original payment card and cannot be made by another method or to a nominee.

Bacs

Where repayment to debit or credit card is not appropriate, Bacs is our preferred method of repayment as it is fast, secure and cheap. Before it can be used, the company or its authorised agent must provide the necessary details of its own or a nominee’s bank or building society account. A company or its authorised agent gives the details in the CT600 or in writing on company or agent’s headed paper.

Where bank details are completed in the CT600 they are automatically stored, displayed in function VTPR (View Taxpayer Record) and used by COTAX for any repayment made automatically. Where the bank details are supplied in writing you can enter and store these in COTAX by using function BOND (Bank and / or Nominee Details). These are then used for any repayment made automatically.

If bank account details are given in an online amended return, they are captured by COTAX if the amendment is automatically processed. Where the amendment is worklisted and not processed automatically, you must enter the bank account details using function BOND.

When a repayment is made by card or Bacs, the credit is normally made to the recipient’s account on the third working day after the repayment has been authorised, either automatically by the system or by a repayment security authoriser (RSA) where selected for security checks.

Where the repayment is selected for security checks by an RSA and the repayment is made and authorised on the same day, COTAX adds an additional day to the processing time for making the repayment.

COTAX only records the date of issue when it receives confirmation of a successful credit. This is usually six to ten days after the repayment has been authorised.

Payable order (automatic)

COTAX only automatically issues a repayment by payable order where repayment to card is not appropriate, the amount is greater than £20 and bank details are not held on the COTAX record.

Where the amount is £20 or less and bank details are not held, COTAX, where possible, automatically reallocates the overpayment or puts the case on LOPD (Overpayments List) or LOPU (Overpayments Review List). See COM126000 for further information about these work lists.

You can still make a repayment for £20 or less where bank details are not available by using either function DIRR or DREP (Direct Repayment). However, Bacs is the department’s preferred method of repayment as it is fast, secure and cost effective, so you should always try to obtain bank details.

When a repayment is made by payable order, it is issued to the company’s registered office address except where the following apply.

The registered office is not in the UK and the company has a UK agent, when it is sent to the agent. See below for details of repayments made to an overseas bank account.

A trustee is acting for the company, when COTAX sends the payable order to the trustee.

The company is in liquidation, when the payable order is sent to the liquidator.

OAS

Where a repayment cannot be made automatically or by using function DIRR or DREP because the COTAX system will not allow it, or the AP is under enquiry, it should be made through OAS. You should reallocate the overpayment to OAS using function REOD (Reallocate out of COTAX) and complete form CT251 with details of the repayment and instructions for the CT Unit in Cumbernauld. See COM120100 for guidance on how to complete form CT251.

CHAPS (Clearing House Automated Payment System)

Where you receive a request to make a repayment using CHAPS, you should explain to the company that CHAPS repayments are expensive to make and the department’s preferred method of repayment is by Bacs as this is fast, secure and cost effective. You should only agree to make a repayment by CHAPS in exceptional circumstances, as in the following examples.

The repayment is for a very large amount and the company demands that it is made by CHAPS.

There has been an error that would cause embarrassment to the department.

The repayment is to be made to an overseas bank and is over £100,000.

All CHAPS repayments must be made by reallocating the overpayment to the OAS system, completing form CT251 and asking the CT Unit in Cumbernauld to make the repayment by CHAPS. See COM120100 for guidance on how to complete form CT251.

For LBS offices that have an agreement in place to go direct to the Treasury Services team to make a CHAPS repayment, you should continue to do this and you do not need to follow the CT251 process. However, it is important to remember that you must still use function MIPO (Manually Issued Payable Order) to note that a repayment has been issued.

Manual payable order

Due to security reasons we never make a repayment of £150,000 or more using the COTAX system to issue a payable order. Wherever possible, you should use Bacs as the preferred method of repayment. However, if you have been unable to obtain Bacs details, you may issue the repayment using a manual payable order.

Corporate Finanace are responsible for issuing these repayments and you should follow the guidance published on the Corporate Finance intranet site under ‘Manual Payable Orders’.

Wherever you issue a repayment by manual payable order it is important that you remember to update the COTAX record using function MIPO (Manually Issued Payable Order) with the payable order details supplied by Finance.

Payee details

Automatic repayments

COTAX makes all automatic repayments, for whatever AP, by first checking whether payment to card is appropriate. The conditions for payment to debit or credit card are that:

the repayment is not for interest only

the card payment was not made more than nine months before the date of the repayment

the repayment does not exceed £98,500

the repayment does not exceed the amount of the original card payment, less any repayments already made to the card.

Where repayment to card is appropriate, it must be made in that way and you cannot override it.

Where repayment to card is not appropriate, COTAX then checks for any bank account details held in COTAX and if present, uses them to make repayment by Bacs. If we hold bank account details, you can view them in function VTPR (View Taxpayer Record).

We always display and use the latest of:

those captured from the latest original return received

those entered on an amended return if the amendment has been automatically processed by COTAX

the details manually entered using function BOND (Bank and / or Nominee Details).

You should note that if bank account details are included on an amended return filed through the CT Online Service, COTAX captures them automatically only where it successfully processes the amendment. If it worklists the amendment for manual intervention, you must enter the bank account or nominee details using function BOND.

If a later return is received and the bank or nominee details have not been completed, any previous details held in COTAX are overwritten by the blank fields.

If bank details are not available and the repayment is greater than £20, COTAX automatically issues a payable order to a nominee address or where there is no nominee, to the registered office of the company except where:

the registered office is not in the UK and the company has a UK agent, when COTAX sends the payable order to the agent

a trustee is acting for the company, when COTAX sends the payable order to the trustee

the company is in liquidation, when COTAX sends the payable order to the liquidator.

If the overpayment is £20 or less and bank details are not available, COTAX does not issue an automatic repayment but, wherever possible, makes an automatic reallocation to an outstanding or future AP. Where it cannot make a reallocation it puts the case on LOPD (Overpayment List) or LOPU (Overpayment Review List). See COM126000 for further information about these work lists.

Non-automatic repayments

Where you use either DIRR or DREP (Direct Repayment) to make the repayment, you need to select how you want to make it.

If any payee details have been stored in COTAX, these are displayed when you use function DIRR or DREP. You can choose not to use these and overwrite them with alternative details if you have received written authority from the company to make the repayment to an alternative address or bank account. These details do not replace those stored in COTAX unless you use function BOND to update the bank details.

Remember you should always make every attempt to make the repayment by Bacs, but where the bank account details are not available then using function DIRR or DREP allows you to make the repayment by payable order for any amount less than £150,000.

Change of payee details

A company may notify us of a change of payee details from that originally entered on the original return for any repayment that is due. Where they do, it must be made on one of the following.

An amended return.

A signed letter from the company or its authorised agent on headed notepaper.

An email from the company or its authorised agent from a known and trusted email address.

A fax on company or its authorised agent’s headed notepaper from a known and trusted fax number.

Where the change is made on an amended return that has been filed online, these automatically update the payee details stored in COTAX when the amendment is successfully processed automatically. Where the amendment is worklisted, the change was not made online or was made by any other method and you accept it, you should use:

function BOND to store the details

function NOTE to make a case note on the COTAX record showing that you have received a change of payee details.

You must not accept any change to payee details received over the telephone.

Amending payee details is one way to divert a repayment fraudulently, so always be vigilant when receiving and dealing with a request.

Nominees

A company may appoint a nominee to receive their repayment. Where they do, they usually complete the relevant section of the return and COTAX stores and uses these details to make an automatic repayment. Where the repayment has been inhibited for any reason, these are the details you should use when using Function DIRR or DREP to make the repayment.

If a company decides after they have filed their tax return to add, change or remove a nominee they must do so on any one of the following.

A signed letter from the company or its authorised agent (that is, where a 64-8 is held) on headed notepaper.

An email from the overpaid company or its authorised agent from a known and trusted email address.

A fax on company or its authorised agent’s headed notepaper from a known and trusted fax number.

You cannot accept any changes over the telephone.

Where you receive any changes to the nominee details other than in an original or amended return that has been filed online you should use:

function BOND to store the details

function NOTE to make a case note on the COTAX show that you have received a change of nominee details.

Overseas bank accounts

COTAX does not have the facility to make a Bacs repayment to foreign banks. Where you find that a repayment needs to be made to an overseas bank account, the repayment should be made by payable order unless the repayment exceeds £100,000 or is due to departmental error or will cause embarrassment.

In these circumstances you can make the repayment by CHAPS.

The repayment is normally made in sterling, but before making the repayment you must confirm that the overseas account can receive CHAPS payments in sterling. Where it cannot, you need to advise the company that the repayment will be made in the currency of the account, but this may not give them the most favourable exchange rate.

Using CHAPS to make a repayment is expensive and is not the preferred method of repayment. You should only use it in exceptional circumstances.

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